Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/105103
Authors: 
Becker, Johannes
Davies, Ronald B.
Jakobs, Gitte
Year of Publication: 
2014
Series/Report no.: 
CESifo Working Paper 5079
Abstract: 
Advance pricing agreements (APAs) determine transfer prices for intra-firm transactions in advance. This paper interprets these contracts as a means to overcome a hold-up problem that occurs because governments cannot commit to non-excessive future tax rates. In addition, with private information, just as in practice, our APAs will be complex and require lengthy negotiations. Nevertheless, implemented APAs lead to a Pareto improvement even when all agents are risk neutral. However, not all efficient APAs are concluded in equilibrium. International agreements to avoid double taxation will likely reduce the number of realized APAs.
Subjects: 
advance pricing agreements
corporate taxation
multinational firms
transfer pricing
JEL: 
H25
M41
G32
Document Type: 
Working Paper

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